Winter 2007
Competing to Win By Heather Johnson Durocher

What Should I Change?

At the time, dropping the line of dolls that sold so well in her Stillwater, MN, shop was the last thing Meg Brownson wanted to do. But when she learned Target would be carrying Manhattan Toys’ Groovy Girls, Brownson says she had no other choice.

“It was hard for me to let it go, but it’s an image thing,” says Brownson, owner of Alfresco Casual Living, located in a quaint downtown district just east of the Twin Cities, which is incidentally where Target is headquartered. “It just doesn’t make any sense to have something that Target has. It just becomes too mainstream. People who are coming into my store are looking for something that’s not in Target.”

Two years later, Brownson tries to take a more proactive approach to the items she carries, a move she credits with helping her thrive among the Targets, Bed Bath & Beyonds, Crate & Barrels and Pottery Barns of the world. She isn’t shy about questioning national sales managers about their products: What is their commitment to the smaller specialty shops like hers? Do they harbor hopes of getting these wares into big-box stores?

“The second that happens,” she says of any possibility her products will show up on big-box store shelves, “I’ll drop them.”

Differentiate, differentiate, differentiate

In a famous study, “Competing with Big Box Merchandisers,” conducted in the mid-1990s about the effect of “big box” (in this case Wal-Mart) on local businesses, Kenneth Stone, Professor Emeritus of Economics at Iowa State University, found: “Merchants selling the same goods as Wal-Mart are in jeopardy. In other words, they are subject to losing some trade to Wal-Mart unless they change their way of business.”

So what exactly defines a change in the way of business? Carrying not-so-easily-found items is one important way independent gift shops are able to attract and keep customers when larger, seemingly cheaper chain stores increasingly dot the retail landscape and channel their bigger advertising budgets to lure buyers in, say store owners and industry experts. “Big box” retailers have enormous buying power and can therefore sell for less. It is an unfortunate truth that most gift shops cannot compete with the larger retail stores on price points. So one “change of business” strategy is to stock a different merchandise mix or create a niche not taken by the “big box.”

The strategy is neatly demonstrated by the likes of Brownson in Minnesota and Thompson Lange, co-owner of Homescapes, Carmel, an upscale direct import gift shop in Carmel, CA. When Lange opened his doors, Pier 1 Imports was a half a block away. But the proximity to the store didn’t intimidate Lange, who says finding his niche has been the answer to competing with big-box stores.

“I’m an importer,” he says. “With Pier 1, it’s reproduction, which is fine, but the only way to compete with that is to go to the real deal and get the real thing. I’ve got the antique and they’ve got the reproduction.”

He doesn’t have the buying power of a large corporation, so he goes the handmade route. “I’m targeting the people who have now decided they always liked Crate and Barrel and Pier 1 but they don’t want what all their friends have.

“A lot of times, people these days talk about ‘independent retail’ and to me, it has morphed into ‘specialty retail,'” Lange says. “If you don’t find a niche and make a statement . . . you’re not going to be able to compete.”

The experts agree. Daniel Butler, vice president of merchandising and retail operations for the National Retail Federation, a trade organization headquartered in Washington, DC, says selling regional items, such as locally made art, is a smart way to set your store apart. “Most national chains don’t get into the regional-type merchandise,” Butler says. “For some gift shops, commemorative items can have a lot of value.”

Focus your energies on what you can do to attract and keep customers for the long haul, retailers advise. Nicole Maile, owner of Euphoria, an “earthly boutique” of natural bath, body and skincare, aromatherapy and fragrance and handcrafted jewelry, accessories and gifts in Traverse City, MI, strives for only the highest-quality items—something she knows can’t necessarily be achieved in a big-box setting.

“The one thing that really sets me apart from them is I take a huge amount of time researching what I bring in,” she says. Fair-trade items are important, she says. “I know who makes it, I know they’re fairly paid if they’re overseas, and I have a lot of loyal customers who come regularly to buy gifts and natural products here because they know I put the research into it.”

And keep this in mind as well: when your merchandise mix is different, the presence of big-box stores in your store’s neck of the woods could even boost sales. The “Competing with Discount Mass Merchandisers” study found: Merchants selling goods and services different from what Wal-Mart sells become natural beneficiaries.

In other words, since they are not competing directly, many of them benefit from the spillover of the extra customers being pulled into town by Wal-Mart.

Where everybody knows your name

An eclectic merchandise mix is a good start, but how else can small retailers compete? The mantra is repeated over and over again: “Customer service is key.” But how does this play out each day? To hear retailers tell it, it involves a whole lot more than simply greeting customers who walk through the door.

“They come in and it’s more of being a friend instead a clerk,” says Maile, owner of Euphoria. “I answer questions really well and get to know customers personally so when they come in, I know what they like already. It’s personally getting to know the customer.”

Once you know your customer, giving them what they want becomes exponentially easier, gift shop owners say. It might involve offering complimentary gift wrapping, special ordering whenever possible, calling when an out-of-stock item arrives or sending not just holiday cards but also hand-written notes to acknowledge monumental events in customers’ lives such as the birth of a baby or moving into a new home.

“The minute I hear my name, I want to buy something because they treated me nice,” Michael Russo, of Gift Association of America, says. “You feel like you’re a part of that store. You’re not going to find that at a big box.”

Equally important to customers, owners find, is seeing familiar faces each time they visit your store. “I’m here six to seven days a week and a lot of people come back because they know they’re dealing with me,” Maile says.

Lange, of Homescapes, Carmel, also finds that customers like to feel they know him and his staff. This is cultivated through television ads—the people in the TV ads are the people in his store, behind the counter—and on the store’s website, where Lange pens a blog and posts photos of trips overseas to locate his unique products.

Selling an experience

Creating a shopping experience rather than simply a place to go in and buy something is also critical, retailers say. Customers want a reprieve from their busy lives, Brownson says, who believes shoppers can best find this in small gift shops.

“I call it a more old-fashioned experience,” says Brownson. “To be able to shop in your independent store, you’re going to see people really putting their life into it and not being directed by some marketing book. There’s more feeling and warmth.”

To make her customers more comfortable when shopping, Maile decided to spend some money and install a vanity and sink in her store. This encourages customers to try multiple products, which many times helps lead to a sale.

Trip Van Roden, president of the Gift and Home Trade Association, a nonprofit professional trade association based in Denver, CO, believes it’s essential for a store to have a personal story. “It’s not about the products and the price. It’s very much the story they can create about the environment of your store. The looks, smells, feels.”

Adds Russo: “Customers are fickle. Unless they really fall in love with your store, they are going to go to whoever wines and dines them and whoever woos them. Play up the benefits of your store. Not everybody wants to go to a big box store.”

Staying visible

You don’t have to have widespread brand recognition (though that would be nice) to attract new customers. Your unique products and personal services are sure to help bring buyers back. But also ask yourself: what are you doing to keep your shop’s name on buyers’ minds?

“If you don’t keep your name in front of the customer, when the customer is ready to buy, they won’t do it with you,” says Russo, who advocates laying out a six-month or 12-month marketing plan that may involve newspaper and cable TV advertising and direct mail campaigns.

“Do the budget and spend the money,” says Russo, who recommends, depending upon how established your business is, allocating 3 to 5 percent of your planned gross sales for advertising annually. “That’s money well spent. When you stop marketing, you stop telling people who you are and what you’re all about. And that’s deadly.”

Brownson selects her advertising venues carefully and it’s paid off, she says. “I advertise in a couple of the local, nicer-quality magazines,” she says. Putting your time and money toward community involvement can prove priceless as well. Hold a trunk show featuring a special collection or host a wine and cheese gathering and showcase new arrivals.

“Find a way to connect to your local community of people and not just print coupons of 10 percent discounts in the Sunday newspaper,” Van Roden says. “The bigger box stores focus on price. Consumers are not always shopping [only] for price.”

Along with holding in-store events, Brownson is working with her fellow downtown businesses. “Some of us businesses have worked on a little co-op advertising so we can make our presence known downtown here,” says Brownson, who also is working with local officials to push for the creation of a convention and visitors bureau in her town.

For those who have websites, the Internet presence can be another marketing tool, says Laura Walasinski, manager of Tabula Tua in Chicago. “We do a lot of wedding registries,” Walasinski says of the home accessories shop. “In one sense we are a small establishment, but we do have a very good website where we do sell items, so we’re not just limited to Chicago just because our store is here.”

The wedding registries bring potential customers to the site as they shop for their friends and family members, and the couple over the years may return to the site for additional home product needs, Walasinski says.

The future is bright

Specialty shop owners must accept that big-box stores are here to stay, experts emphasize. Competing with chain stores is always a concern for independent gift shops, perhaps now more than ever as these corporate giants grow in number and in some cases delve into more specialty lines (think Target with its “Global Bazaar” products introduced mid-season 2006).

“There are always going to be people who are going to buy Crate and Barrel and Pottery Barn,” Walasinski acknowledges. But, she adds, plenty of others will seek items elsewhere, at small, independently owned businesses because “there’s a story behind them or an explanation of why something is the way it is.”

Russo says the key to a thriving business is getting creative juices flowing. “For the creative small gift shop, the climate is good and business is running ahead,” he says. “From reports I see, it’s anywhere from 4 to 7 percent.”

By creative, Russo means a shop that shakes things up a little, perhaps by offering after-hours shopping for a group of customers by reservation. Or incorporating other personal touches, such as alerting loyal customers to new arrivals before the general public knows about them.

Russo says he’s even met with retailers reporting double-digit sales increases, up to 30 percent. “I was really surprised. What really stood out was their creativity,” he says, citing these shops’ awareness of their competition and then offering what the other stores are not.

“To me, the biggest problem retailers have with big boxes is the fear of them,” says Russo, who believes an independent’s potential earnings boil down to knowing customers well and understanding the absolute best ways to reach them.

Heather Johnson Durocher

Durocher is a northern Michigan-based journalist who writes frequently about business for newspapers and magazines. She has contributed to USA Weekend, Woman's Day, Parents and American Baby. Visit her website at HeatherDurocher.com




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